Federal Tax ID Number Explained
Navigating the legal and tax requirements of doing business in Los Angeles can be confusing2 min read
Navigating the legal and tax requirements of doing business in Los Angeles can be confusing. Fortunately, getting an understanding of the federal tax ID number, or Employer Identification Number (EIN), is a useful starting point. This federal tax ID number serves as the basis for filing taxes, setting up a business bank account, filing certain forms, and more. If you’re located in Los Angeles and need help with this and other legal matters, UpCounsel’s network of experienced attorneys can handle all of your legal needs.
What Is a Federal Tax ID Number?
The federal tax ID number, available for free from the Internal Revenue Service (IRS), identifies your business in all of the tax proceedings your company is involved in. In most cases, the ID is issued immediately upon request.
To get a federal tax ID number, first determine and set up the legal status of your business: Sole proprietorship, corporation, partnership, or LLC. Depending on local regulation, certain documents may be required when you begin the process, such as licenses, articles of incorporation, or publication agreements. Business structures are similar but distinct, and knowing the differences between these will help you avoid filing mistakes.
The ID number is usually required for each entity associated with the business, particularly any trusts or separate divisions as is stipulated by the trust deed. All social security numbers related to the business will become invalid once the ID number is issued.
Do I Need an EIN?
Whether you need to acquire a federal tax ID number depends on the type of business you have, as well as where it’s located and how many people are employed there. Here is a quick guide to help you determine whether you need to apply for an EIN:
- Sole Proprietorship: Generally, this type of business doesn’t require an EIN. In some cases, having one may make certain tasks easier such as opening a bank account or filing for taxes.
- Partnerships: These businesses typically need an EIN.
- Corporations and LLCs: All corporations and LLCs need an EIN.
In Los Angeles, certain cities and counties require EINs for businesses operating within their jurisdiction, so it’s important to inquire about that before you register your business or trademark.
Using an EIN
Gaining a basic understanding of a federal tax ID number is essential for any business in Los Angeles. You will need it to open a bank account for your business, report taxes, sign contracts, hire employees, and more. If your employees are located outside the U.S., they will need to obtain an ITIN (Individual Taxpayer Identification Number) in order to do business with you.
For general advice and assistance with navigating the legal and tax documents related to doing business in Los Angeles, UpCounsel’s team of experienced business lawyers can provide all the support your company needs. With 14 years of experience on average, attorney profiles on UpCounsel display client ratings and reviews of past work, allowing you to make an informed decision when selecting the right attorney for your business.
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